If a real value of a nation's freely floating currency increases,and the nation's current account is initially zero,its capital account will most likely be

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When the real value of a nation's freely floating currency increases, it makes imports cheaper and exports more expensive. This results in an increase in the nation's trade surplus or a decrease in its trade deficit. As the current account is initially zero, the increase in the real value of the currency will lead to a current account surplus. This surplus will induce capital inflows, resulting in a capital account surplus. Therefore, the capital account will most likely be in surplus.

If a Real Value of a Nation's Freely Floating Currency